Gold prices surged to fresh lifetime highs on Tuesday, September 23, supported by robust festive demand in India, a weaker US dollar, and growing expectations of further interest rate cuts by the US Federal Reserve.
In domestic markets, 24-carat gold climbed to around Rs 114,300 per 10 grams, while 22-carat gold was quoted near Rs 104,800. Silver also joined the rally, trading above Rs 1,40,000 per kg in some markets. Globally, spot gold rose above US$ 3,700 per ounce during Asian trading hours, extending its record-setting momentum.
There are about four key factors that drives the price rally:
1. Festive season demand in India
The start of the Navratri festival lifted jewellery buying, traditionally considered auspicious in Indian households. Seasonal purchases, coupled with advance buying for upcoming Diwali and wedding season, have kept physical demand strong despite elevated price levels.
2. Federal Reserve rate cut expectations
Global investors are increasingly convinced that the US Federal Reserve will cut interest rates in upcoming meetings. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive as a store of value. Traders are now watching Fed Chair Jerome Powell’s comments later this week for confirmation.
3. Weakness in the US dollar
A softer U.S. dollar has added momentum to bullion’s rally, making gold more affordable for buyers holding other currencies and fueling investment demand worldwide.
4. Safe-haven appeal
Uncertainty around global economic growth, ongoing geopolitical tensions, and volatile equity markets are pushing investors toward gold as a safe-haven asset. Gold’s role as a hedge against inflation and currency fluctuations is once again in focus.
The markets reacted accordingly. In India, Jewelers reported strong footfalls as buyers chose to advance purchases ahead of further price increases. However, analysts caution that extremely high prices could limit bulk buying, especially among price-sensitive households.
Globally, investment flows into gold ETFs and futures remain strong, with speculators increasing long positions. The global risk sentiment is supporting sustained inflows into bullion.
Riding on gold’s momentum, silver prices also rallied sharply, with industrial demand and festive purchases adding to the uptrend.
The broader implications of the gold price rally will reflect in various fronts.
On the domestic consumption front, affordability concerns could slow momentum if prices rise much further, although cultural demand remains resilient.
Gold is increasingly being seen as a hedge in portfolios in the investment front, especially as equity markets stay volatile and bond yields fall.
As far as the inflation outlook is concerned, the ability of manufacturers and traders to pass on high prices will influence wider inflation trends in India, especially if the rupee weakens further.
However, a strong rally in gold often pushes up imports, which could weigh on India’s current account balance unless offset by strong exports elsewhere.
Analysts believe that in the near term, gold prices are expected to remain firm, supported by festive season demand, a weaker US dollar, and expectations of Fed rate cuts. But any unexpected hawkish signals from the Fed or profit-booking by investors could trigger corrections.
Key price levels to watch are Rs 114,000–Rs 115,000 per 10 grams in domestic markets and US$ 3,700 per ounce in global trade. Analysts say that as long as festive demand stays strong and monetary policy expectations remain dovish, gold could continue testing new highs.